‘Potato Cartel’ Drove Up Prices Nearly 50 Percent, Says Study
You may have been spending too much on spuds.
In 2015, two potato collectives, the United Potato Growers of America (UPGA) and the United Potato Growers of Idaho (UPGI) settled an antitrust class-action lawsuit brought against them by potato buyers out of court. The suit alleged that these groups colluded to drive up potato prices by cutting its members’ production levels. By settling, these collectives avoided the big question of whether or not their activities truly violated anti-trust laws, but a recent report from California State University, Northridge, shows just how impactful this behavior was.
According to an analysis by CSUN business law professor Melanie Stallings Williams and her colleagues, from 2004 to 2012, this “potato cartel,” was able to significantly increase prices “with an average nationwide overcharge of 30 percent for fresh potatoes and 48.7 percent for Russet potatoes at the point of shipping, and 24.4 percent for fresh potatoes and 36.5 percent for Russet potatoes at the wholesale level.”
“If you had a potato in the last decade or so, then you paid significantly more because of widespread collusion in the potato industry,” Williams was quoted as saying. “Every time you went to McDonald’s, every time you had something that had potato starch added to it, you paid more.” She said even if you don’t think of yourself as someone who eats potatoes, you were probably still affected. “Potatoes are the leading vegetable crop in the United States,” she continues, “and are a staple in every household in America. Even those who don’t eat potatoes on a regular basis may be surprised to learn how often potato starch is used in everyday items that we consume, as a supplement or a filler. That means every one of us was impacted.”
This “cartel” first formed in 2005 and within a year already controlled more than 60 percent of America’s fresh potato-growing acreage. They then used seemingly aggressive tactics – including drones and satellite imagery – to get members to cut growing acreage by about 20 percent to help buoy the market. Though this may seem like a cut-and-dry case of collusion, Williams points out that farmers are in a unique situation: The Capper-Volstead Act, enacted in 1922, gives farmers some leeway to work together to support their industry. However, little precedent has been set as to whether this allows the kind of production-cutting practices these potato groups were sued over.
“Because of the expense, uncertainty of the verdict and potentially high awards, cases like these tend to settle,” Williams explained. “But while the legality of agricultural cartels is uncertain, what is indisputable is that such behavior raises prices — a lot.”